Better Market Tone of Monday Still Holding

August 5, 2014

Service sector purchasing manager survey results for many economies and Ezone retail sales data are out. There have also been announced interest rate decisions from central banks in India and Australia. Investors now waiting for U.S. data and U.S. market leadership.

The dollar has risen 0.3% against the loonie and Swiss franc, 0.2% versus the euro and Australian dollar, and 0.1% relative to the yen and kiwi. The yuan and sterling are steady.

Share prices fell 2.0% in Taiwan, 1.0% in Japan, 0.7% in South Korea, 0.4% in Australia and 0.3% in China but rose 0.7% in India, 0.3% in Singapore and 0.2% in Hong Kong. Stocks have risen 0.8% in France, 0.6% in Germany, 1.0% in Switzerland and 0.4% in Britain, while equities in Italy and Spain show drops of 0.5% and 0.1%.

The 10-year JGB dipped a basis point to a new low for the move of 0.51%. The ten-year British gilt is a basis point firmer, and the 10-year German bund is unchanged.

The Reserve Bank of India left its repo (8%) and reverse repo (7%) unchanged at the levels in place since January. Hikes of 25 bps each had been implemented that month and in September and October of 2013. The Statuatory Liquidity Rate was eased, however to 22.5% from 23.0%, and the released statement was less hawkish than before.

The Reserve Bank of Australia retained a record-low Official Cash Rate of 2.5%, the level since a cut in August 2013. Inflation is at the top of the target range but projected to ease downward. The Australian and Indian central bank decisions were as expected.

Japan’s service-sector purchasing managers index printed above the 50 no-change line for the first time since March, rising 1.4 points to 50.4 in July. The composite PMI was also at a 4-month high, rising 0.2 points to 50.2.

China’s service-sector PMI sank 3.1 point to 50.0 according to the HSBC index. That was the lowest reading since this data series was launched in 2005. The composite Chinese PMI eased from a 15-month high of 52.4 in June to a 2-month low of 51.6 in July.

Russia’s PMI indices of 51.3 on the composite index (an 8-month high) and 49.7 on services (a 2-month low) were better than anticipated, but it seems only a matter of time before they are clobbered by western sanctions.

Australia’s services PMI recovered 1.7 points to 49.3 in July, a 2-month high, thanks to a 3.5-point improvement in the orders component.

The British services PMI rose by a further 1.4 points to an 8-month high of 59.1 in July, lifting the U.K. composite PMI by 0.9 points to 58.8. The data were consistent with continuing GDP growth of about 0.8% quarter-on-quarter.

Euroland’s composite and services PMI scores of 53.8 and 54.2 were revised down 0.2 points relative to preliminary estimates but represent 3- and 38-month highs. On the composite index, Germany, Spain and France recorded 3-month highs of 55.7, 55.7 and 49.4, while the Italian composite dipped to a 2-month low of 55.1. Regarding services, the German index of 56.7 was at a 37-month peak. Spain (56.2) and France (50.8) reached 3-month highs, while Italy’s 52.8 was a 2-month low.

Sweden’s service-sector PMI leaped to 60.1 in July from 54.6 in June and surpassed May’s 58.5 as well.

Egypt’s non-oil PMI regressed to a 2-month low of 49.0. In contrast, the Saudi non-oil PMI reading of 60.1 was up 0.9 points and at a 22-month high, while the U.A.E. PMI of 58.0 was buoyant but not quite as much as the June reading of 58.2. Lebanon’s private PMI fell 1.2 points to a 4-month low of 47.9.

Hong Kong’s private purchasing managers index printed at a 5-month high of 50.4. Singapore scored 51.5, up from 50.5 in June.

Retail sales in the euro area advanced for a third straight month, rising 0.4% in June and by 2.4% on year, the most since May 2007. Between 1Q and 2Q, sales volume climbed 1.7% at an annualized rate.

In the year to June, Czech and Hungarian retail sales climbed by 6.4% and 3.8%, respectfully.

Australia’s trade deficit narrowed more than forecast to A$ 1.68 billion in June from A$ 2.04 billion in May.

Indonesia recorded 5.1% on-year GDP growth in the second quarter, similar to the 5.2% increase in the year to 1Q.

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